Revenue impacts are being felt differentially based on geography. Hospitals in the West region stand out as 10 percent ahead of prior year and 3 percent favorable to budget for NPSR/AD. Not unexpected, this same cohort has also experienced decreases in bad debt and charity, suggesting improved payer mix and/or collections. Even though the majority of other regions have also experienced some declines in bad debt and charity, they also are reporting decreases in NPSR/AD while reporting significant increases in NPSR per adjusted patient day (NPSR/APD). This dichotomy (i.e., increasing NPSR/APD with concurrent decreases in NPSR/AD) demonstrates the impact that length of stay can have with fee-for-volume-based payers and the potential longer term revenue risks being borne by providers under those types of contracts. This underscores the need for organizations to transition from fee-for-volume to fee-for-value payer relationships.
Changes in the IP/OP factor are fairly clustered, with the majority of regions and hospital sizes continuing to see favorable performance against budget, as well as year over year. However, this latest flash report does show a small actual year-over-year decline for hospitals located in the Northeast/Mid-Atlantic region. This is important to watch given that this metric has generally continued to grow—declines typically are representative of niche operators, joint venture, or retail competitors entering or expanding in a market.

NPSR per Adj. Discharge

NPSR per Adj. Patient Day

IP/OP

Bad Debt and Charity

NPSR per Adjusted Discharge

NPSR per Adjusted Patient Day

IP/OP Adjustment Factor

Bad Debt And Charity

National Revenue Observations

Overall, revenues have continued the trend of decline on a year-over-year basis, and hospitals are struggling to achieve NPSR budgets. Outpatient volumes and revenues traditionally translate to a positive financial return for health systems. Acute hospitals also typically face tremendous competition from other providers, however, including physicians and niche players, and can thus be vulnerable to significant drops in outpatient revenue and profitability when new market service options open.

Growth in the IP/OP adjustment factor underscores the continuing trend of rising outpatient volumes. Leaders must closely analyze changes in payer and service mix that are key drivers to these metrics, and to overall organizational operating margins. The ability to better forecast and budget for revenue swings is imperative.

Every size hospital is experiencing negative performance as compared to budget expectations for NPSR per adjusted discharge. In addition, this month’s report shows that only hospitals with >500 beds are generating actual NPSR/AD in excess of prior year, a significant broadening of this negative variance from previous months. This suggests that the payment and payer mix challenges that initially were limited to smaller and less urban providers have expanded to the broader industry, regardless of facility size.